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Finance Dictionary and Glossary of Investment Terms
Federal National Mortgage Association
FNMA or Fannie Mae. A congressionally chartered corporation which buys mortgages on the secondary market, pools them and sells them as mortgage-backed securities to investors on the open market. Monthly principal and interest payments are guaranteed by FNMA but not by the U..S. Government.
Also known as Fannie Mae, the FNMA buys mortgages and packages them into mortgage securities that are then resold to investors. The agency thus helps make considerable additional capital available for mortgage lending. The securities created by Fannie Mae are fully taxable, but they are backed by the government and so default is virtually impossible. These mortgage-backed bonds are also highly liquid and pay more interest than Treasury securities.